The Double Taxation Relief (Taxes on Income) (Malta) Order 1995

ARTICLE 22 Elimination of double taxation

(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):

(a) Malta tax payable under the laws of Malta and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Malta (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income, or chargeable gains by reference to which the Malta tax is computed;

(b) in the case of a dividend paid by a company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Malta tax for which credit may be allowed under the provisions of sub–paragraph (a) of this paragraph) the Malta tax payable by the company in respect of the profits out of which such dividend is paid.

(2) Subject to the provisions of the law of Malta regarding the allowance as a credit against Malta tax of tax payable in a territory outside Malta, where, in accordance with the provisions of this Convention, there is included in a Malta assessment profits, income or chargeable gains from sources within the United Kingdom, the United Kingdom tax payable, whether directly or by deduction, in respect of those sources (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any Malta tax payable in respect of those profits, income or chargeable gains.

(3) For the purposes of paragraphs (1) and (2) of this Article, profits, income and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise in that other Contracting State.

(4) Subject to paragraphs (5) and (6) of this Article, for the purposes of paragraph (1) of this Article the term “Malta tax payable” shall be deemed to include any amount which would have been payable as Malta tax for any year but for a deduction allowed in computing taxable income, or an exemption or reduction of tax granted for that year or any part thereof, under any of the following provisions of Malta law:

(a) the provisions of:

(i) section 3 and, where a deduction is allowed in computing taxable income by way of investment allowance, section 4 of the Aids to Industries Ordinance 1959;

(ii) sections 7, 8 and 9 (so far as it provides for exemption from tax on dividends paid out of the gains for profits, or part thereof, of a company which are relieved from income tax under the provisions of section 7), 19, 20, 23 and 36(5) of the Industrial Development Act 1988;

so far as the provisions in question were in force on, and have not been modified since, the date of signature of this Convention, or have been modified only in minor respects so as not to affect their general character and provided always that the competent authority of Malta has certified that any such exemption from or reduction of Malta tax given under these sections has been granted in order to promote industrial, commercial, scientific, educational or other development in Malta and that the gains or profits of the company, or any part thereof, were not exempt from Malta tax for the year in question, or part thereof, under the provisions of Sections 4 or 5 of the Industrial Development Act 1988, and the competent authority of the United Kingdom has accepted that such exemption or reduction has been granted for such purpose; or

(b) any other provision which may subsequently be enacted allowing a deduction in computing taxable income, or granting an exemption or reduction of tax, which is agreed by the competent authorities of the Contracting States to be of a substantially similar character to any of the provisions referred to in sub–paragraph (a)(i) or (ii) of this paragraph, so far as it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character, and subject always to certification and acceptance having taken place as provided for under sub–paragraph (a) of this paragraph.

(5) Relief from United Kingdom tax by virtue of paragraph (4) of this Article shall be given for a period of ten years only, beginning with the date on which this Convention entered into force.

(6) The period referred to in paragraph (5) of this Article may be extended by agreement between the Contracting States.